Labor will take the budget into bigger deficits and rack up higher debt to protect jobs and economic growth as global conditions worsen.
The economy is shaping up to be the central issue of an election campaign which could kick off as early as this Sunday, with a poll likely to be held on September 7.
Treasurer Chris Bowen on Friday released a mini-budget forecasting a $30.1 billion deficit for 2013/14 - up from the $18 billion predicted in the budget just 10 weeks ago.
"Australia is undergoing an economic transition," Mr Bowen said.
"Not a crisis, but a transition that needs careful economic management."
Tough domestic conditions for business, slowing growth in China and Europe's ongoing recession mean government revenues will take a $33 billion hit over the next four years.
To counter this, Mr Bowen outlined $17.4 billion of "responsible savings", including $5.8 billion in higher taxes on cigarettes and a $1.8 billion change to fringe benefits tax on cars.
The most controversial change is a new $733 million levy on bank deposits to protect savings in a time of crisis.
Mr Bowen said it would be up to banks to decide whether to pass the levy on to customers, while Opposition Leader Tony Abbott called it a "cash grab".
Setting a course for a $4 billion surplus in 2016/17, the treasurer recommitted Labor to all of its existing spending on schools, family payments, disability care, health and carbon tax compensation.
The statement's release was timed to reduce the electoral impact of bad news in Treasury's Pre-Election Fiscal and Economic Outlook to be released 10 days into the election campaign.
Shadow treasurer Joe Hockey lambasted Labor over its eight budget deficits in a row.
"It's blatantly obvious - Labor has lost control of the budget and is losing control of the economy," Mr Hockey said.
The national jobless rate will creep up to 6.25 per cent, while expectations of economic growth have dropped to 2.5 per cent from the budget forecast of 2.75 per cent.
Economists say an interest rate cut of around 25 points is almost certain next Tuesday, given the easing growth figures.
While Labor will seize on this as a plus for home borrowers, the coalition will paint it as a sign of economic weakness.
Australian Industry Group chief Innes Willox said the budget update showed the tax base and spending priorities were not sustainable.
"Our tax system clearly requires major surgery," he said.
About $500 million in unspecified funds in the mini-budget could be used for election promises, such as a revamped car industry plan.
Finance Minister Penny Wong said it was "standard budget practice" to have such funds available.
The government's new plan to stop boat arrivals - a deal with Papua New Guinea - will cost at least $1.4 billion including aid spending.
